Defective Stock Right Transfer Contract’s Effect And Its Civil Liability

The Companies legislation provides that the shareholders can be funded inmonetary or non-monetary property, while allowing installment payment ofregistered capital. Diversity provisions of the Company Law about the form of theshareholders’ contribution and flexibility provisions of the Company Law about thetime of contribution undoubtedly encourage shareholder activism to invest. Butthese not only increase the risk of defects funded and affect the security oftransactions, but also affect the company’s business development. Although Chinaintroduced in2010, the Supreme People’s Court on the application of the People’sRepublic of China Company Law Provisions on Several Issues (c)(hereinafterreferred to as the "Company Law" to explain (c)), provides further about defectiveStock right, such as restrictions and responsibility, but still not perfect. So it isnecessary to attach great importance to the flaws of the equity transfer.In addition to the introduction and conclusion part, this paper is divided intofive parts, specific structural arrangements are as follows:The first part introduced a case of defective Stock right transfer dispute andbased on which leads to two issues to be discussed in this paper: defective Stockright transfer contract’s effect as well as the main responsibility after the defectiveStock right transfer.The second part introduced the concept of defective Stock right; and thenfollowed different behavior of defective contribution and then divided defectiveStock right into three categories: the defective Stock right formed by not fullyfunded contribution, the defective Stock right formed by completely unfundedcontribution and capital flight funded.The third part, first introduced four theories about the defective Stock righttransfer and then analyzed them.Finally chose the forth theory:diffrence. The theorybelieved that the judgment of the validity of the contract should based on whetherStock seller fraudulent buyer. If there is fraud, the contract is voidable. If there is nofraud, the contract is effective. Finally put forward my point of view that thejudgment of defective Stock right transfer contract’s effect must be cutted into threeelements: the main body, behavior and intention. The fourth part, first introduced four theories of the main responsibility afterthe defective stock right transfer and analyzed them. Finally think the forth theory ismore reasonable, that is According to The Transferee in Good Faith or Not toDetermine Responsibility; then divided responsibilities into three categories, that isthe responsibility to the company, the responsibility to the other fully fundedshareholders, the responsibility to the creditors of the company. Finally discussedspecifically about these responsibilites.The fifth part, combined with the above theory analyzed the case in the firstpart from three element: the body, behavior and intention and then draw aconculsion.